The products back then were totally ridiculous. For example, 5/1 interest only loans with reverse amortization. What does that mean? A normal adjustable-rate m

The products back then were totally ridiculous. For example, 5/1 interest only loans with reverse amortization. What does that mean? A normal adjustable-rate mortgage starts off with a fixed rate period, say 5 years. Then the remainder is a 25-year adjustable rate mortgage. What these guys would do is sell a 5 year loan with a balloon payment at the end. The reasoning being that "hey the market is appreciating so fast right now, you'll refinance before the loan is over anyway." Interest only loans mean that for the entire time of the loan, you're not paying any capital back, and will still owe the entire balance. So you're basically renting the property. But wait, there's more! With reverse amortization, you could pay $1000 for a $2500/mo payment and the difference would be plopped onto your balance! So people would buy a $300,000 house. Then at the end of the 5 year period they'd owe $400,000. Very common problem. Unfortunately, as those started coming due, the banks were suspicious and would no longer lend people money so easily. And the requirements to get those crazy loans were pretty lax in the first place. Brokers at the time were acting like loan sharks. And they had a like 6% incentive to do so. It was pretty out of hand on all sides of the deal. Plus there were numerous cable TV shows going on about how great it was to own a house, and tons of TV commercials talking about how easy it was to get a loan. I mean even today, people are extremely pushy about buying houses.